This underrated sector is almost recession-proof, analysts say

It has a 73% chance of outperforming during a recession.

As the global economy falls into a slowdown, fears of a looming recession continues to gain traction. The telco sector, however, has proven resilient during these crises, recording positive net additions even during the Global Financial Crisis.

According to analysts from UOB Kay Hian, Singapore's three telcos have weathered past economic storms quite well. M1 exceeded expectations in three out of four quarters during the past two recessions, while Starhub outperformed during the two quarters of the GFC. Meanwhile, giant Singtel outperformed six out of nine quarters of the past four recessions.

"The average quantum of outperformance per quarter during recessions was 3.2% for M1, 3.8% for StarHub and 5.9% for Singtel," UOB Kay Hian said.

The Global Financial Crisis serves as a benchmark for how companies fare during recessions, and telcos passed with flying colors.

"Telcos experienced single-digit declines in service revenue and EBITDA during the GFC. StarHub, led by ex-CEO Terry Clontz, gained market share during the GFC," UOB Kay Hian said.

However, telcos are not necessarily immune to a recession’s effects, as post-paid ARPU declined 5-15% yoy during the Global Financial Crisis, due to lower roaming contributions as consumers began cutting back on travelling for both business and leisure.

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